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ANS extends slump
Hurricane Francine stems tide of red ink Sept. 11; oil down for week
Steve Sutherlin Petroleum News
Alaska North Slope gained $1.14 Sept. 11 to close at $72.10 per barrel, while West Texas Intermediate jumped $1.56 to close at $67.31, and Brent jumped $1.42 to close at $70.61.
(See chart in the online issue PDF)
The day's price increase was a reprieve from a longer-term slide that began in August, erasing roughly half of the losses notched by the indexes the previous day.
Crude prices rode tailwinds generated by fears of extended production shutdowns in the Gulf of Mexico, as Hurricane Francine churned toward landfall in Louisiana. The U.S. Bureau of Safety and Environmental Enforcement said 39% of crude production in the gulf was shut in as operators secured platforms and evacuated crews.
ANS plummeted $2.46 Sept. 10 to close at $70.96 -- a new low for 2024. ANS avoided sinking into the $60s, but Brent did not; it plummeted $2.65 to close at $69.19, and WTI plummeted $2.96 to close at $65.75.
Resistant to fighting Weak oil demand in China, along with U.S. and European recession fears have weighed on the market in recent months, while the market has been remarkably resilient to upside from geopolitical strife and supply disruptions, such as shut-ins caused by fighting between rival governments in Libya.
Changes in U.S. crude stockpiles reported Sept. 11 by the U.S. Energy Information Administration were too small to move markets.
U.S. commercial crude oil inventories for the week ending Sept. 6 -- excluding the Strategic Petroleum Reserve -- edged up by 0.8 million barrels from the previous week to 419.1 million barrels, 4% below the five-year average for the time of year, the EIA said.
Analysts responding to a Reuters poll had called for a 987,000-barrel build.
Sept. 9 trading added a dash of black ink, taking ANS 58 cents higher to a close of $73.82, as WTI added $1.04 to close at $68.71, and Brent rose 78 cents to close at $71.84.
ANS fell $1.10 Sept. 6 to close at $72.83, while WTI dropped $1.48 to close at $67.67, and Brent dropped $1.63 to close at $71.06.
Trading was mixed and muted Sept. 5, as ANS gained 9 cents to close at $73.94, WTI slid 5 cents to close at $69.15, and Brent shed a penny to close at $72.69.
From Wednesday to Wednesday, ANS shed $1.75 from its close of $73.85 Sept. 4, to $72.10 on Sept. 11.
ANS traded at a $1.49 premium over Brent Sept. 11, and at a $4.79 premium over WTI on the day.
WoodMac: U.S. liquids output rising Wood Mackenzie has forecast the United States will produce 14 million barrels per day of crude and condensate by the end of 2026, up from more than 13 million bpd -- a global liquids production record -- in 2023, Simon Flowers, Wood Mackenzie chairman and chief analyst said Sept. 5 in The Edge.
Big oil is looking to build its U. S. exposure.
Eight months into 2024, M&A deals in U.S. upstream exceeded two-thirds of 2023's record $130 billion, Flowers said.
"Business models retooled, U.S. E&P has matured from niche, capital-hungry cyclicals into big, resilient cash machines'" he said. "The Independents alone collectively returned over US$90 billion in dividends and buybacks in the past two years, equivalent to 16% of their market cap."
The United States has the ingredients investors look for, huge resource potential; access to acreage and relatively stable fiscal frameworks; broad social license to operate; innovative and responsive supply chain; and access to capital, Flowers said.
"U.S. institutions have provided debt and equity funding to the industry in a way their international counterparts can only dream of," he said. "The investibility of the Lower 48 is supported by quick payback periods for operator investments, and the flexibility of business models to adapt to an ever-changing external environment."
The second U.S. success factor is a ruthless and relentless focus on innovation, reinvention and, most recently, operational efficiency, Flowers said.
"The entire upstream ecosystem has structurally reinvented itself," he said. "Producers, suppliers and shippers have aggressively stripped out the excesses of the last decade, today delivering more for less investment,"
The third U.S. success factor is that operators leverage data and scale differently, Flowers said.
"The growing bounty of diagnostics available, many leveraging AI, is being tapped into in the U.S. like never before," he said. "Investments in data science and process technologies are optimizing resource recovery, while scaling up portfolios through M&A is finally creating the massive contiguous lease blocks shale players have chased for a decade."
Flowers said the November 2024 election results are important, but not critical for U.S. upstream success.
"Operators' ambitions to convert poorer-quality reservoirs and wells into economic opportunities should help shore up U.S. supply and put U.S. energy security on even firmer ground," he said.
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